Ohio State University. Department of Agricultural, Environmental, and Development Economics
Abstract
Domestic resource mobilization is becoming increasingly important in many developing countries because of the problems they are facing in attaining additional foreign resources and aid. But in many countries systematic disincentives must be removed before the full rural deposit mobilization potential can be realized. This paper presents an analysis of rural deposit mobilization in four Asian countries: Bangladesh, Indonesia, the Philippines and Thailand. With the exception of Bangladesh, there is no clear upward trend in share of rural deposits relative to total deposits. Institutions specializing in rural lending appear to mobilize an even smaller share of their total resources than the rest of the banking system. Determinants of savings behavior are discussed considering incentives for both savers and lenders. Administered interest rates are identified as a problem because they often result in negative real rates on deposits for savers while making rediscount and other government funds cheaper for banks/branches than mobilizing deposits. Efforts to expand banks/branches into rural areas have been thwarted by credit policies which make them unviable. Therefore, reforms in interest rates and other financial policies are often a necessary first step in expanding rural deposit mobilization